FCC: Competition alive and well in wireless telecom

About 90% of U.S. consumers had the choice of at least three mobile wireless carriers last year, resulting in a 25% decline in the average price of service, according to a recent FCC report on competition in the industry.

“The wireless industry is one of a few in telecom in which we do see lowering prices, unlike in the DSL or cable modem [sectors], where cost is actually rising,” said Elliott Hamilton, an analyst at The Strategis Group.

Despite the price drop, the sector received $52.5 billion in revenue last year, up from just over $40 billion generated in 1999—primarily on the strength of consumers increasing their usage 38% to 255 minutes in 2000, according to the report.

But duplicating this usage growth rate will be difficult—a circumstance that has carriers concerned, especially as the FCC expects further price decreases, Hamilton continued.

“Can you keep increasing the number of minutes people will want to use? It already is high now,” he said. “We see the minutes of use [reaching] a plateau, because it is hard for people to double their usage from 300 minutes to 600.

“This puts pressure on carriers as far as their ARPUs (average revenue per user), which is why they are looking for new 3G services to add that extra $10 or $15 per month.”

Another concern in the industry is that the number of subscribers will plateau. Last year, the number of wireless users increased 27% to 109.5 million, meaning 39% of Americans have a mobile phone, according to the FCC report said.